MIAMI – American Airlines (AA) has informed its Management and Support (MSS) staff that it needs to reduce its cost structure, including its most significant expense – the cost of compensations and benefits, as it now plans to operate a smaller airline for the foreseeable future.
The measures announced in a letter by AA to its MSS staff come regardless of the carrier’s stated pre-pandemic liquidity, the significant financial assistance provided by the government, and the cash it has raised in the capital markets.
American has already taken steps to prepare for this new reality, with nearly 39,000 team members choosing voluntary leave or early retirement, in addition to fleet retirement accelerations that will leave the airline flying around 100 fewer aircraft next summer.
30% MSS staff cut
The memo does not beat around the bush, stating that a smaller airline means that AA will need an MSS team that is 30% leaner.
In addition to the 30% MSS staff reduction, other cost-saving reductions include suspending the 2020 MSS merit program, requiring MSS to take 50% of their vacation by September 30, and suspending the vacation rollover policy so that no unused vacation days roll into 2021.
Another cost-saving reduction includes canceling the 2020 L5 and above short-term incentive plan, which was scheduled to pay a portion of the target as a result of meeting operation metrics.
Besides the MSS staff reduction, AA is opening a new voluntary early-out program fir MSS team members to create a more efficient management team. The window to volunteer will remain open through the end of the day on June 10.
Leaders will then finalize the remainder of their go-forward MSS teams once volunteers are known; however, if there are not enough early volunteers, AA will implement involuntary separations, with impacted team members remaining on AA’s payroll through September 30, 2020.
Impacted team members will also receive full pay and benefits through the expiration date of the CARES-Act Payroll Support Program. Although no severance will be paid, AA will provide affected team members with one year of D2R travel status as well as COBRA health coverage for 18 months.
Once the MSS staff is restructured and in place, the letter goes on to imply that the same will happen to the airline’s frontline team.
For the frontline team, the same as for the MSS team
Repeating that it will come out a smaller airline with fewer routes and fewer flights, AA says that it plans to open a new voluntary leave and early-out program for frontline workers using the same methodology as with the MSS team but with the goal of not needing to implement further involuntary leaves.
In light of this “stretch” goal of not having to implement involuntary furloughs, AA will be working with unions in the short-term to facilitate the more hopeful outcome for the airline: enough voluntary leaves.
American is committed to three goals: ensuring adequate cash to weather out the downturn, reducing its cash burn by removing as much expenses as possible, and restoring confidence in air travel.
The sad part is that these goals mean difficult times for those departing team members who have given the airline “their all and are leaving through no fault of their own.”
As with all airline and airport staff that now find themselves in a similar situation all over the world, they do deserve “respect and gratitude” from industry leaders and employers such as AA.
As today’s AA memo end, “they are owed our renewed commitment and our collective effort to return America to profitability and growth as quickly as possible.”